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U.S., Brazil Should Consider Negotiating FTA, Business Group Says

Monday, February 01, 2016

Sandler, Travis & Rosenberg Trade Report

A new study shows that a U.S.-Brazil trade agreement, once fully implemented, would increase U.S. national income, wages and employment as well as bilateral trade, according to the U.S. Chamber of Commerce’s Brazil-U.S. Business Council. Council officials said that while such an agreement “is not a short-term objective” the study shows “why Brazil should be next on the U.S.’s trade dialogue priority list.”

An executive summary of the report finds that the U.S.-Brazil trade relationship is already extensive. Total trade reached $108.3 billion in 2014 and is heavily concentrated in goods such as chemicals, petroleum, transportation equipment and machinery. However, services trade is on the rise and is led by travel/tourism-related services and transportation services. Exports to Brazil have been growing at the same average annual rate as exports to China over the last ten years (about 15 percent), and Brazil now accounts for more total U.S. exports than Russia, India and South Africa combined. Imports from Brazil are “relatively modest” and have grown by an average 6.6 percent per year. As a result, the U.S. trade balance with Brazil shifted from a $4.2 billion deficit in 2004 to a $32.1 billion surplus in 2014. In addition, Brazilian investment in the U.S. rose from $29 billion in 2007 to $93 billion in 2012.

The report states that a trade agreement would further boost two-way trade by addressing existing problem areas, including Brazil’s “especially high” trade barriers on imported beverages and tobacco; agriculture, forestry and fisheries products; motor vehicles and parts; processed foods; apparel; and leather products. Assuming that such an agreement fully eliminates tariffs and that the Trans-Pacific Partnership, Transatlantic Trade and Investment Partnership, and Trade in Services Agreement are in full effect, the report estimates the following effects of a U.S.-Brazil agreement: U.S. exports to Brazil would grow by 78 percent and imports from Brazil would increase by 21 percent, there would be job growth in 432 of 435 U.S. congressional districts and overall U.S. employment would expand by nearly 100,000 jobs, real wages would increase by 0.11 percent, and U.S. household incomes would grow by about $30 billion.